Summary
Interpreting Sections 33 to 39 of the Karnataka Stamp Act, 1957, the Supreme Court held that an agreement of sale reciting delivery of possession attracts ad valorem duty and must be duly stamped before it can be used in evidence. But since the defendant had asked for the document to be impounded and sent to the District Registrar, and the trial court had not yet acted under Section 34, the trial court could not itself impose the mandatory ten-times penalty under Section 34; the District Registrar must fix the duty and a commensurate penalty under Section 39.
Issues
- Whether an agreement of sale reciting delivery of possession is a conveyance attracting ad valorem stamp duty under Section 2(d) read with the Schedule of the Karnataka Stamp Act, 1957.
- Whether the trial court could impose ten times the deficit duty as penalty under Section 34 when the instrument had been impounded at the defendant's instance and referred to the District Registrar, instead of leaving the penalty to the District Registrar under Section 39.
Provisions considered
- Section 2(d) and Schedule, Article 20(1), Karnataka Stamp Act, 1957An agreement of sale coupled with delivery of possession conforms to the definition of conveyance and attracts ad valorem duty; the appellant, who sought injunction on the strength of possession delivered under the agreement, had to pay the deficit duty and penalty to rely on it. (¶¶ 13, 14, 15)
- Section 33, Karnataka Stamp Act, 1957Every person authorised to receive evidence must impound an insufficiently stamped instrument produced before him and examine the duty payable; impounding places the instrument in the custody of the law and sets the scheme of Sections 34 to 39 in motion. (¶¶ 16, 21.1, 21.1.1)
- Section 34 and proviso (a), Karnataka Stamp Act, 1957Bars admission in evidence of an instrument not duly stamped; under the proviso it may be admitted on payment of the deficit duty and a penalty of ten times, and the court or person acting under this section has no discretion to reduce that penalty. (¶¶ 8.2, 14.1, 16, 21.2, 22)
- Section 37(1) and (2), Karnataka Stamp Act, 1957Section 37(1) covers instruments admitted on payment under Section 34 or 36, a copy of which is sent to the Deputy Commissioner with the amount; Section 37(2) covers every other case, in which the original is sent to the Deputy Commissioner, including where a party opts to have duty and penalty determined by the District Registrar. (¶¶ 14.2, 17.4, 21.4)
- Section 39(1)(b), Karnataka Stamp Act, 1957The Deputy Commissioner/District Registrar may levy a penalty of up to ten times the deficit; ten times is the outer limit for extreme cases and the authority must fix a commensurate penalty, following Trustees of H.C. Dhanda Trust and Petiti Subba Rao. (¶¶ 17.4, 19, 20, 21.6, 22)
- Section 35, Karnataka Stamp Act, 1957Once an instrument has been admitted in evidence, its admission cannot be questioned later in the same proceeding on the ground of insufficient stamping. (¶ 21.3)
Held
- The Stamp Act is a fiscal measure meant to secure revenue, not to arm a litigant with a technical objection; non-stamping or insufficient stamping makes an instrument inadmissible, not void, and the defect is curable by paying the duty and penalty (relying on Hindustan Steel Ltd. v. Dilip Construction Co. and the seven-judge decision on arbitration agreements and stamping). Being a fiscal statute, its provisions on levy are construed strictly. (¶¶ 17, 17.1, 17.2, 17.3)
- The discretion under Sections 34 and 39 is distinct and settled: a court or person acting under Section 34 has no discretion and must levy ten times the deficit as penalty, whereas the Deputy Commissioner/District Registrar under Section 39(1)(b) has discretion to fix a commensurate penalty up to ten times, the maximum being reserved for extreme cases such as fraud or deceit. (¶¶ 14.1, 17.4, 19, 20, 21.2, 21.6)
- Procedure summarised: a party relying on an insufficiently stamped instrument may either pay duty and the fixed penalty under Section 34, or apply directly to the District Registrar under Section 39 and have duty and penalty determined there; if a party opts to have the document sent to the Deputy Commissioner before the court acts under Section 34, the court must send it under Section 37(2). Once duty and penalty are paid under either route, the stamp objection is no longer available to the opposing party, and a party may also regularise the instrument before the District Registrar before producing it in court. (¶¶ 21, 21.1.1, 21.4, 21.5, 21.7, 21.8)
- Here the defendant objected before the stage of admission and sought impounding and reference to the District Registrar, and the trial court had called for the District Registrar's report without exercising jurisdiction under Section 34. Imposing a ten-times penalty under Section 34 at that stage denied the plaintiff the option of having the penalty decided under Section 39 and was illegal; the plaintiff must pay what is due, but as decided by the District Registrar. (¶¶ 18, 22)
Result
Appeals partly allowed; the direction to pay ten times the deficit duty as penalty set aside; the trial court to send the agreement of sale to the District Registrar to determine deficit duty and penalty, and on receipt of the compliance certificate to receive it in evidence without stamp objection; other objections of the respondent left open.